Freedom Market Commentary Asset Management Services // Q2 2021

SECOND QUARTER HIGHLIGHTS

Equity markets continue broad rally 10-year Treasury declines

Inflation reaches 20 year high U.S. Federal Reserve remains supportive

WHAT THE 10-YEAR TREASURY TELLS US MARKET UPDATE The 10-year Treasury is a note issued by the U.S. Most everywhere you looked – the United States, Brazil, government that guarantees repayment of principal a France, Russia – economies grew in the second quarter decade after it is issued, plus interest along the way. of 2021, with increased distribution of effective vaccines Analysts consider its yield a key economic benchmark helping to drive COVID-19 cases lower and economic and an indicator of sentiment. Gains are outlooks higher. Large caps, small caps, considered a positive sign, declines typically cause for and more contributed to a broad equity market rally. High- caution as a signal may be eschewing stocks quality bonds joined the rally, too, somewhat quizzically. for the stability of government-issued bonds. Yields declined and prices rose, even as inflation reached its highest level in more than 20 years. Categorizing Lately, the 10-year Treasury has been in the headlines inflation as transitory, the U.S. Federal Reserve (the Fed) for its rather unexpected behavior. As the U.S. economy recovered from the shutdowns of the pandemic, the 10- reinforced its commitment to supportive monetary policy, year yield climbed to about 1.8%, as would be expected, anticipating inflation will normalize once supply catches on its way to a projected 2.0%. In late June, however, it up to the increased demand generated by people getting dropped to below 1.5% and has since fluctuated with the out and about again. release of economic data points, including recent news that inflation was at a 20-year high.

The Asset Management Services (AMS) Investment Committee (IC) will keep a close watch on this important indicator. Overall, the AMS IC believes the economic outlook remains positive and that increased inflation levels may be higher in the term before settling into a range considered normal.

Market commentary is generic in nature and not necessarily specific to the Freedom objective discussed herein but will include information material to the Freedom platform in general. Freedom Commentary is generally written from a passive standpoint and there are limitations to this data as strategies include active management. Actively managed strategies and holdings may have reacted differently during the quarter than the market segments discussed herein. Indices and peer groups are not available for direct investment. Any investor who attempts to mimic the performance of an index and peer group would incur fees and expenses which would reduce returns. Asset Allocation and Diversification does not ensure a profit or protect against a loss. All investments are subject to risk including a profit or a loss. There is no assurance that any investment strategy will be successful. Past performance is not a guarantee of future results. are not guaranteed and a company’s future ability to pay dividends may be limited.

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EQUITY

All major asset classes within the U.S. equity market saw positive returns – distinguishing among them was merely a matter of how positive. U.S. large-cap equity returned 8.5% for the quarter, as measured by the S&P 500 TR index, which reached new trading highs in late June as the quarter drew to a close. U.S. small- to mid-cap equity returned 5.4% for the quarter, as measured by the Russell 2500 TR index. Dividend equity returned 5.8%, as measured by the S&P 500 Dividend Aristocrats TR index.

Across the board, corporate earnings continued to exceed expectations, even as estimates were being revised higher. Employment numbers also improved as people returned to dining at restaurants and resumed travel-related activities.

Internationally, the story was much the same. Non-U.S. developed markets large-cap equity returned 5.2% for the quarter, as measured by the MSCI EAFE NR USD index, while emerging markets equity returned 5.0% for the quarter, as measured by the MSCI Emerging Markets NR index.

EQUITY POSITIONING IN FREEDOM PORTFOLIOS

Given the prospects for supportive monetary policy to remain in place and for increased government spending, the AMS IC holds a positive view of equity, where portfolio positioning is currently a slight overweight. Within equity, the overweight is to U.S. large caps, which appear well-supported and positioned to benefit from the return to normalcy we are already seeing. The AMS IC has a neutral view of U.S. small caps, which tend to be tied more closely to economic activity and carry additional downside risk.

The AMS IC has a cautious view of international developed markets, with a slight underweight reflective of the expectation recovery in non-U.S. markets will be slower. The AMS IC has a neutral view of emerging markets, where attractive valuations and an improving global outlook may provide opportunities.

Equity Returns Emerging Emerging International International Markets Large Markets Small U.S. Large Cap U.S. Mid Cap U.S. Small Cap Large Cap Small Cap Cap Cap 70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0 2Q2021 1 Year 5 Years Source: Morningstar As of 06/30/2021

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FIXED INCOME

Core fixed income returned 1.8% for the quarter, as measured by the Bloomberg Barclays U.S. Aggregate Bond TR index. While high-quality bond performance was relatively muted compared to equities, its positive performance represented a reprieve for investors. Treasury yields declined during the quarter, driving longer-term bond prices higher. This is a bit of an oddity during a period of rising inflation, perhaps an indication investors either agree with the Fed that inflation is transitory or doubt its commitment to low interest rates. High-yield bonds, which tend to behave more like equities, returned 2.7% for the quarter, as measured by the Bloomberg Barclays U.S. High Yield 2% Issuer Cap TR index.

FIXED INCOME POSITIONING IN FREEDOM PORTFOLIOS

The AMS IC holds a cautious view of fixed income, given the likelihood low interest rates could diminish return potential. Bonds continue to have value, however, for their potential to mitigate equity risk. Despite the recent reduction in spread between Treasuries and high-yield bonds, the AMS IC has a slightly favorable view of high-yield bonds. The AMS IC has a neutral view of emerging markets debt, where exposure was recently reintroduced after a lengthy absence.

Fixed Income Returns U.S. Municipal Nontraditional Emerging Markets U.S. Fixed Income Bonds U.S. High Yield Bonds International Bonds Bonds 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 -2.0 2Q2021 1 Year 5 Years Source: Morningstar As of 06/30/2021

ALTERNATIVES

Multialternative investments returned 2.72% for the quarter, as measured by the U.S. Fund Multialternative peer group. This asset class, valuable for its ability to provide diversification, underperformed equities and core fixed income, as would be expected when returns for both are positive.

ALTERNATIVES POSITIONING IN FREEDOM PORTFOLIOS

The AMS IC holds a slightly unfavorable view of alternative investments, which are utilized for diversification purposes.

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Alternative Investments Returns Market Neutral Managed Futures Market Neutral /Short Equity Commodities 50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Source: Morningstar As of 06/30/2021 2Q2021 1 Year 5 Years

OUTLOOK

With all signs pointing toward economic growth – corporations are consistently revising their earnings outlooks higher and U.S. employment data is consistently coming in stronger – the AMS IC expects equities to continue to outperform bonds. Freedom portfolios currently have a slight overweight to equity and a slight underweight to fixed income.

The AMS IC continues to believe the U.S. economy is positioned more strategically for growth than foreign economies, especially those where vaccine distribution has been less uniform and COVID-19 variants pose a greater threat. Central banks around the world, including the U.S. Federal Reserve, remain supportive and increased government spending in the United States is likely as Congress moves closer to passing an infrastructure package.

The AMS IC believes inflation is likely to remain elevated for the next several years relative to the low levels of the past decade, yet should remain near levels considered normal – an average of 2.2% for the next five years. If conditions continue to improve and inflation stabilizes, the Fed could begin to talk about tapering its support, possibly starting in 2022.

The AMS IC evaluates Freedom portfolios on a continuous basis, and any changes would be in an attempt to earn the best possible return for the amount of downside risk the committee is willing to tolerate, in alignment with portfolio objectives.

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The foregoing content reflects the opinions of Raymond James Asset - Investing in small-cap stocks generally involves greater risks, and Management Services and is subject to change at any time without therefore, may not be appropriate for every investor. Stocks of smaller notice. Content provided herein is for informational purposes only. There or newer or mid-sized companies may be more likely to realize more is no guarantee that these statements, opinions or forecasts provided substantial growth as well as suffer more significant losses than larger herein will prove to be correct. The charts and tables presented herein or more established issuers. are for illustrative purposes only and should not be considered as the sole basis for your investment decision. - These portfolios may be subject to international, small-cap and sector- focus exposures as well. Accounts may have over weighted sector and Indices and peer groups are not available for direct investment. Any issuer positions, and may result in greater and risk. investor who attempts to mimic the performance of an index or peer group would incur fees and expenses that would reduce returns. Asset - Alternative investments are generally considered speculative in nature allocation and diversification does not ensure a profit or protect against and may involve a high degree of risk, particularly if concentrating a loss. There is no assurance that any investment strategy will be investments in one or few alternative investments. These risks are successful. potentially greater and substantially different than those associated with traditional equity or fixed income investments. The investment strategies Further information on the funds selected for the Freedom used by certain Funds may require a substantial use of leverage. The portfolios is available by prospectus, which can be obtained investment strategies employed and associated risks are more fully through your financial advisor. Investors should carefully consider disclosed in each Fund's prospectus, which is available from your the investment objectives, risks, charges and expenses of mutual financial advisor. funds and exchange-traded funds before investing. The prospectus contains this and other information about the funds and should be - Commodities trading is generally considered speculative because of read carefully before investing. All investments are subject to risk, the significant potential for investment loss. Among the factors that could including loss. affect the value of the fund's investments in commodities are cyclical economic conditions, sudden political events, changes in sectors You should understand that the annual advisory fee charged in the these affecting a particular industry or commodity, and adverse international programs is in addition to the management fees and operating expenses monetary policies. Markets for precious metals and other commodities charged by mutual funds and exchange-traded funds if applicable. These are likely to be volatile and there may be sharp price fluctuations even additional considerations, as well as the fee schedule, are listed more during periods when prices overall are rising. fully in the Client Agreement and the Raymond James & Associate's Form ADV Part 2A. - Specific sector investing such as real estate can be subject to different and greater risks than more diversified investments. Declines in the It is important to review the investment objectives, risk tolerance, tax value of real estate, economic conditions, property taxes, tax laws and objectives and liquidity needs before choosing an investment style or interest rates all present potential risks to real estate investments. manager. All investments carry a certain degree of risk and no one particular investment style or manager is suitable for all types of - Companies in the technology industry are subject to fierce competition, investors. and their products and services may be subject to rapid obsolescence. Additional risks may include: INDEX AND PEER GROUP DESCRIPTIONS: - Fixed-income securities (or “bonds”) are exposed to various risks These indices and peer groups are not available for direct investment. including but not limited to credit (risk of default or principal and interest Any product which attempts to mimic the performance will incur payments), market and liquidity, interest rate, reinvestment, legislative expenses such as management fees and transaction costs that reduce (changes to the tax code), and call risks. returns. - There is an inverse relationship between interest rate movements and Bloomberg Barclays U.S. Aggregate Bond Index (U.S. Fixed fixed income prices. Generally, when interest rates rise, fixed income Income): This index includes investment grade U.S. Government bonds, prices fall and when interest rates fall, fixed income prices generally rise. corporate bonds, mortgage pass-through securities and asset-backed Short-term bonds with maturities of three years or less will generally have securities that are publicly offered for sale in the United States. The lower yields than long term bonds which are more susceptible to interest securities in the index must have at least one year remaining to maturity. rate risk. MSCI EAFE Index (International Large Cap): A free float-adjusted - International investing involves special risks, including currency index that is designed to measure the equity market fluctuations, different financial accounting standards, and possible performance of developed markets, excluding the U.S & Canada. It political and economic volatility. consists of the following 22 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong - Investing in emerging markets can be riskier than investing in well- Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, established foreign markets. Emerging and developing markets may be Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the less liquid and more volatile because they tend to reflect economic United Kingdom. structures that are generally less diverse and mature and political systems that may be less stable than those in more developed countries. MSCI Emerging Market Index (Emerging Markets Equities): A free float-adjusted market capitalization index that is designed to measure

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equity market performance of emerging markets. As of June 2009 the 2,500 companies covered in the Russell 3000 universe of United States- MSCI Emerging Markets Index consisted of the following 22 emerging based listed equities. market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, S&P 500: Representing approximately 80% of the investable U.S. equity Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, market, the S&P 500 measures changes in market conditions Thailand, and Turkey. based on the average performance of 500 widely held common stocks. It is a market-weighted index calculated on a total return basis with Morningstar US OE Multialternative (Multialternative): These funds dividend reinvested. will use a combination of alternative strategies such as taking long and short positions in equity and debt, trading futures, or using convertible S&P 500 Dividend Aristocrats Index is a list of companies, mainly well- arbitrage, among others. Funds in this category have a majority of their known large-cap, blue-chip companies, in the S&P 500 with a track assets exposed to alternative strategies and include both funds with record of increasing dividends for at least 25 consecutive years and static allocations to alternative strategies and funds tactically allocating includes stocks with a float-adjusted market capitalization of at least $3 among alternative strategies and asset classes. billion and an average daily trading volume of at least $5 million. Russell 2500 (U.S. Small to Mid-Cap): A broad index featuring 2,500 Bloomberg Barclays U.S. High Yield - 2% Issuer Cap: The index is stocks that cover the small and mid-cap market capitalizations. The the 2% Issuer Cap component of the U.S Corporate High Yield Index. Russell 2500 is a market cap weighted index that includes the smallest

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